Indian stocks attractive amid emerging market turmoil
COUNTRY’S EQUITIES A TOP PICK FOR EMIRATES INVESTMENT BANK AMID GLOOMY OUTLOOK
After the retracement from the initial euphoria, valuations of Indian equities are the most attractive and Nadi Bargouti, a top official at Emirates Investment Bank, feels that the world’s fastest growing economy is an outlier among emerging markets.
The benchmark Bombay Stock Exchange index has shed only 7 per cent so far this year, a gauge for an economy that is considered as the only bright spot in an otherwise gloomy world.
“Emerging markets have been impacted the most due to the talk about a rate hike, and also their currencies. China has been scaring investors off the emerging market complex. Despite a gloomy outlook for emerging markets, India is our top pick with all the changes with the new government,” Bargouti, managing director and head of asset management, told Gulf News.
“If we look at Brics [Brazil, Russia, India, China and South Africa] countries for example, India actually stands out. If we are looking at emerging markets, India would be our best bet because of its attractive valuations and structural changes in the economy,” Bargouti added.
The EIB is currently underweight on Indian equities and by the middle of next year it plans to re-rate them to overweight, and by the end of 2016 it plans to be significantly overweight.
Barings Asset Management also agrees with Emirates Investment Bank.
“On counts of GDP growth and the fiscal deficit or current account deficit, India is relatively well-placed and so should have less of an impact of the expected hike in the Fed funds rate,” Ajay Argal, Head of Indian Equities, Baring Asset Management, told Gulf News.
Bandwagon
Barings is positive on private sector financials, consumer discretionary and industrial stocks.
EIB didn’t jump on the bandwagon when everyone was buying because the bank thought it was overhyped, but it now considers it a good entry point in Indian stocks and plans to build up positions over the next couple of years. India has tremendously benefited from a more than 50 per cent decline in oil prices and shifted the money in building roads, and has invested in infrastructure projects among others. “Going ahead, we expect manufacturing to expand and leave more disposable incomes in the hands of consumers,” Bargouti said.
Ever since September Emirates Investment Bank has been shifting its investments to low volatility instruments such as trade finance investments and alternative investment strategies from highly volatile ones after raising cash from equities and fixed income in September.
EIB plans to avoid Brazil and is cautious on Russia given that the market has been oversold. The bank feels that Iran would be one of the most attractive markets after it opens for investors next year.
Min Lan Tan, head of APAC investment office, UBS, feels ample domestic liquidity and intensified policy support should prevent a hard landing in China.